Bonds

Question 0

Bond premium and discount is amort over contractual life

Answer 0

IFRS is over expected life

Question 1

US GAAP bond issue cost is a separate asset amort from date of issuance
Cash
Bond discount
Bond payable

Answer 1

IFRs bond issue cost are deducted from CV of the liability and amort using effective interest method.
Cash
Bond payable

Question 2

SL method to amort bond premium or discount is not GAAP but allowed if not material. It’s is not allowed in IFRS

Answer 2

Premium or discount/ number of periods outstanding= periodic amort

Question 3

Price of a discount of premium bond is calculated by:

Answer 3

PV of interest payments ( faceXstated rate) + PV of face at maturity date.

Question 4

Bond issue bet. Interest dates

Answer 4

Accured interest is added to price of bond, purchaser pays interest and is reimbursed at the next intesrt payment period

Question 5

Bond conversation to CS can be recorded by BV method GAAP or non GAAP market value method

Answer 5

BV - no gain or loss.. APIC is the excess of bonds CV over CS par less cost
BP
Premium on BP
            CS
             APIC

MV- gain and loss rec
APIC is the diff bet market value of stock and par value

BP
Premium
Loss on conversation 
              CS 
               APIC

Question 12

JE for bond with warrent

Answer 12

Cash
BP
APIC– warrants

Question 13

Bonds with detachable warrents may be recorded at issuance using 2 ways:

Answer 13

Warrents only method is info FV of warrent is known
Or
Market value method is FV of both band and warrant is known.

Question 14

Warrent only method

APIC warrents is the FV of the warrent.

Answer 14

Market value method:
1. Add FV of bond and warrent
2. Multiply the % of bond or warrent over total to the price of the bond to get the warrent and the bonds FV .
3. Use that value as APIC warrents–
So FV of warrent is ( FV of warrent/ total FV ) (price of bond )

Question 15

To find gain or loss on an bond extinguishment: gain or loss =
Reacquisition price - net carrying amount.

Answer 15

CV= face
- un amortized discount
+ unamotized premium
- unamotized issue cost reported as an asset

Question 16

Bond issue cost amort over life of bond

Answer 16

Eg. Bond isse cost =200
10 year bond
So 200/10yr=20per year

Question 17

Debenture are

Answer 17

Unsecured bonds

Question 18

Term bonds have a single

Answer 18

Fixed maturity date.

Question 19

Variable rate bonds

Answer 19

Have interest rates that change.

Question 20

Refinancing

Answer 20

Sell new bond to buy back old bond debt

Question 21

Yield is another name for

Answer 21

Market or effective interest rate

Question 22

IFRS convertible bond should be rec with a liability and equity component.

Answer 22

Bond liability is the FV and difference of proceeds will be allocated to the feature as equity.

Question 23

Sales type lease intesrt revenue should be rec

Answer 23

Over the period of the lease using the effective interest method.

Question 24

Bond liability = (bond face value)( discount or premium)

Answer 24

Discount or premium in sale of bonds are part of the CV of bonds in BS, regardless if the bonds are assets or liabilities.
Bond issue cost are not netted or part if cv do bonds in us GAAP.

Question 25

Bonds sinking fund increase by revenue earned on investments

Answer 25

It will NOT decrease when investments are purchased.